Legal Question in Civil Litigation in Michigan

It would be smart to consult with a local bankruptcy attorney first and see if that works in your situation.

If you let the insurance company sue you, then you will have between 3-4 weeks to respond to the complaint (depending on whether you were served personally or via certified mail). If you do not respond to this lawsuit then you will be held in default. Ultimately, the insurance company would have a judgment against you and they would have the ability to collect from you by utilizing various methods - they might subpoena you to show up to a "debtor's examination" where they ask you questions, under oath, about the nature and location of your assets. They could garnish wages, bank accounts, levy assets...

In sum, it is a process to be sued, and a process to collect on a judgment. However, you should seek the advise of an attorney to discuss your unique situation and see if they can negotiate a better out come for you.

If it's any comfort to you, as long as restitution to the insurance company was not made a part of your sentence, you could ignore them. Insurance companies dislike suing poor people The penalty is a money judgement which, if you have no money, will go uncollected while earning about 6%/year. The various methods for the company to collect against you all cost them time and money and are relatively ineffective if you keep your wits about you (e.g. never become eligible for a tax refund).

After a while the sum they want may be sold to a debt collector for pennies on the dollar. They may settle with you for a lot less than their present demand before that happens.

Focus your attention on staying clean and sober. Repayment to them is the least of your life challenges.